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11/20/2012 09:45 AM

GE's Growth in Wind Reflects Changing Nature of World Markets

SustainableBusiness.com News

10 years after entering the wind industry, General Electric is celebrating the installation of its 20,000th turbine.

Taken together, those turbines could power Hong Kong and London for an entire year.

In 2012 alone, GE shipped 5,000 turbines – double that over the previous two years. Next year, GE expects to install 3000 turbines worldwide, reflecting the drop in the world market that's affecting the industry.

GE has been focused on driving down costs and increasing the reliability of its turbines, and it surely benefits from the conglomerate's extensive manufacturing, sourcing and logistics network.

Although GE is expanding in India, pushing competitors like Suzlon and Vestas out, it could be muscled out of Latin America by China.

India's wind market is growing 30% a year and has become the third biggest wind market (after China and the US). Only 14 gigawatts (GW) of its 48 GW potential has been developed, according to the country's Center for Wind Energy Technology.

GE is making headway there because of a policy shift that favors bigger, more efficient projects that can produce lots of energy in low-wind situations.

That leaves Suzlon and Vestas behind because they tend to build and then transfer wind farms to investors that rely more on tax relief than energy generation. India ended the tax benefit earlier this year.

GE, on the other hand, only builds the turbines. Under a contract with local developer Greenko Group Plc, which has plans for 1 GW of wind farms, GE will supply at least 450 MW of turbines over the next three years. Last year, GE invested $50 million in Greenko.

Because Suzlon, India’s biggest turbine maker, and Vestas, the world's biggest, are struggling with their balance sheets, it's become less clear to developers that they can deliver on orders.

What Will Happen in South America?

GE's position in South America, the world's fastest-growing market, is less assured, however.

China is promoting its home-grown turbine manufacturers there by offering government-backed loans to developers that carry interest rates as much as 50% less than local banks, reports Bloomberg.

For example, China Development Bank is loaning $261 million for a wind farm in Argentina that uses 100 megawatts of turbines made by China-based XEMC Windpower Co.

"The name of the game here is the loan," Eduardo Restuccia, Executive Vice President of Geassa told Bloomberg. "It's not possible to get a long-term loan from a commercial bank." Multi-year loans for wind farms are considered too risky compared to loans to buy homes or cars.

"Anytime you bring the debt, part and parcel with the turbines," it makes it easier to complete a sale, Matthew Olive, vice president of sales at Goldwind's Americas told Bloomberg.